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WASHINGTON, DC-Without abandoning malls, retailers are diversifying their real estate options, entering downtowns and opting for more lifestyle center locations. In addition, aided by technology, they are taking a more holistic approach to managing their real estate portfolios throughout the entire lifecycle.

These are among the conclusions revealed during a preview of the 2007 Retail Real Estate Study, sponsored by the National Retail Federation and Conducted by AMR Research Inc. The full report will be unveiled during NRF’s annual convention, January 13-16 in New York City.

The 43 retail executives surveyed said they planned to have 11% of their stores located in urban street-front locations by the end of this year. This compares with 8% a year ago. Lifestyle center locations are also inching ahead to take 9% of store locations by year-end, compared with 8% in the previous year’s study.

The majority of stores will continue to be located in malls. Yet, with growth in the other two types of locations, these retailers will cut back on mall and strip locations with plans for 44% in those settings planned for this year versus 48% in 2006.

“Throughout the country, traditional main streets are being revitalized to include an assortment of new retail shops, from department and clothing stores to coffee shops,” said Carleen Kohut, CFO of NRF and manager of the federation’s Real Estate Executives Council. “Urban storefronts are beginning to play an increasingly important role in retailers’ real estate strategies.”

The move to cities, Rob Garf, VP and general manager of retail strategies for AMR, requires new formats, particularly among “large box specialty stores,” which are moving from 50,000 sf to between 5,000 sf and 10,000 sf in urban locations. The smaller real estate, he added, also calls for different merchandising strategies.

Typically, of 10 sites under consideration, just one is selected, according to the study. In a leased environment, it generally takes from three to six months before a store opens. Ground-up openings take 12 months or more. “The longer it takes, the greater the risk,” Garf noted. One retailer in the study identified more than 1,500 tasks that had to be completed prior to a store opening, including many that relied on third-party providers of services and materials.

Asked about the impact of the consolidation of department stores on malls, Garf said, “landlords will have to work harder to fill vacancies. They have to get more creative about how to capture more consumers for longer periods of time.” The solutions are ranging from movie theaters to bowling alleys to hotels.

“Demographics are bubbling to the top of (retailers’) considerations,” Garf said, noting that for four out of five of the survey participants, it was the chief determiner of location. However, he also said retailers are now taking management of their retail portfolio to a new level by looking at the entire lifecycle, not just new development.

New technological tools are aiding the process. “As retailers are faced with increasingly complex accounting procedures, competitive environments and nationwide store management, they are turning to software as a solution to help them manage each stage of the real estate process more efficiently,” said Garf.

The sale of software that manages real estate has experienced double-digit growth this year, he said. According to the survey, 42% of the retailers now use these applications, which range from simple desktop programs, such as Microsoft Excel, to specific technologies that help them manage the process.

The survey pointed to four important trends impacting retailers. Chief among them is the blurring of segments and channels. “Grocers are selling general merchandise, and convenience stores, such as Wawa, are selling fresh produce,” he noted.

The proliferation of private label and global expansion are also key trends. The fourth is the availability of information. “Information is ubiquitous,” Garf said, “but it is not necessarily all being turned into intelligence.”

The available information applies to knowledge about demographic segmentation, competition and traffic patterns, which include patterns within a store and without, such as the impact of co-tenancies. “It is difficult to pull all of this information together into intelligent market planning without the use of technology,” he said.

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